What's Next in the Russo-Ukrainian War? Part II

Operation Spider's Web: Escalation Signals in the Russo-Ukrainian War

Doug Crescenzi

02 Jun 2025 — 6 min read

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TL;DR:

Ukraine’s "Operation Spider's Web" damaged over 40 Russian aircraft, coinciding with Trump’s warning
October ceasefire odds falling, signaling prolonged conflict risks and potential energy market volatility
Escalating tensions may strain NATO-Russia relations, disrupt supply chains, and impact currencies like the hryvnia, with markets offering early signals
The "How many jobs added in May?" market shows a 36% chance of 100K–149K jobs, but "no Fed rate cuts in 2025" - in spite of a recent dip - continues its steady climb, hinting at geopolitical-driven caution despite cooling inflation

Market Snapshots

Event Breakdown

What's Next in the Russo-Ukrainian War? Part II: The latest developments in the Russo-Ukrainian War, marked by Ukraine's audacious drone strikes deep within Russian territory, have reflected fascinating signals through prediction markets. This week’s event breakdown builds on last week's analysis, focusing on the movements of thirteen key Polymarket indicators over the past seven days. The Ukrainian operation, dubbed "Operation Spider's Web," targeted strategic airbases, including those housing nuclear-capable bombers, with reports suggesting over 40 aircraft damaged. This bold move, executed just days after Trump’s cryptic warning of "bad things..REALLY BAD" for Russia, has intensified speculation about the conflict’s trajectory.

Over the last seven days, odds for Russian captures of Ukrainian cities by specific deadlines—such as Kostyantynivka by August 31st and December 31st—had decreased before the attack. They have since moved upward a few points following the Ukrainian drone strikes. Similarly, the market “Will Russia capture Kupiansk by December 31st?” has moved upward as Russian retaliation looms. However, the movement across these markets has been modest which is perhaps a reflection of deeper liquidity (i.e., the “Will Russia capture Pokrovsk by...?” markets have over $1.2M in volume) and market uncertainty.

The timing of Ukraine’s strikes, coinciding with impending peace talks in Istanbul, suggests a calculated gamble that could either force Russian concessions or provoke a decisive counterstrike.

These market movements carry profound real-world implications. If Russia captures key territories like Siversk or Pokrovsk, supply chain instability could spike, weakening currencies like the Ukrainian hryvnia and driving up European gas prices. Traders might hedge against these risks, while policymakers could adjust sanctions or military aid.

The decline in the Russia x Ukraine Ceasefire Markets over the past seven days, with probabilities dropping across all three markets signals fading optimism for near-term peace.

This downward trend, driven by Ukraine’s provocative drone strikes and Russia’s retaliatory rhetoric, suggests a heightened risk of prolonged conflict, potentially destabilizing Eastern European economies and exacerbating energy market volatility as winter approaches. The decreasing ceasefire odds underscore a critical juncture, where the absence of de-escalation could amplify global economic ripple effects, from grain shortages to inflationary pressures.

Similar to the chart we shared last week, the following seven day chart maps out the relationships between the offensive (red) and ceasefire markets (yellow). It’s particularly interesting to see how offensive and ceasefire markets moved in opposite directions between May 31st and June 1st before the majority of mainstream media began to cover the attack.

The interplay between offensive and ceasefire markets, visualized in the chart, highlights a diverging trend—red lines trending upward, yellow lines dipping—suggesting a near-term focus on conflict over peace. Stakeholders, from traders positioning for a Pokrovsk offensive to policymakers planning aid based on Siversk odds, can use these indicators to navigate the uncertainty.

Lastly, the recent Ukrainian drone strikes have also reverberated through related Polymarket markets, reflecting broader geopolitical shifts over the past seven days. Notably, the likelihood of "U.S. recognizes Russian sovereignty over Crimea in 2025?" has dropped sharply to 20%, signaling diminished prospects for U.S. diplomatic concessions following Ukraine's aggressive operation.

Meanwhile, the odds of "Will Putin meet with Zelenskyy in 2025?" have increased slightly, suggesting that despite heightened tensions, markets see an increasing likelihood of direct talks. The market for "Will Ukraine agree to give up Russian territory in Kursk?" has increased to 14%, indicating skepticism about Ukrainian territorial concessions, while "NATO/EU troops fighting in Ukraine in 2025?" has edged up slightly to 9%, hinting at a growing risk of Western military involvement. These movements collectively underscore the attack’s ripple effects, amplifying geopolitical uncertainty and potentially further straining NATO-Russia dynamics.

As 2025 unfolds, these market movements will shape economic and political landscapes. The drone strikes’ impact, combined with Trump’s remarks and the Istanbul talks’ outcome, could either escalate tensions or open negotiation windows. Monitoring these markets offers a quantitative edge, empowering informed decisions amid the Russo-Ukrainian War’s complexities.

Related markets & forecasts:

Long-Tail Radar

The Polymarket market "How many jobs added in May?"—currently with over $92K in volume—offers a fascinating lens into economic expectations, particularly when viewed alongside more liquid markets like "How many Fed rate cuts in 2025?" ($7,980,282 in volume) and "How high will inflation get in 2025?" ($756,645 in volume). Over the past month, the jobs market has shown a notable shift, with the probability of the U.S. adding between 100K and 149K jobs in May climbing to 36% as of the time of this writing, up from earlier lows.

This suggests prediction markets are anticipating moderate job growth, a signal of economic resilience despite global uncertainties. Meanwhile, the inflation market reflects declining fears, with the odds of inflation exceeding 3% in 2025 dropping to 66.5% from a high of 79% earlier in May, and higher thresholds like 4% or 5% seeing sharp declines to 30.5% and 14%, respectively.

This juxtaposition raises an intriguing question: if job growth is moderately strong and inflation expectations are cooling, why does the "Fed rate cuts" market still show a 27% likelihood of no rate cuts in 2025, with only a modest dip over the same period?

Typically, robust job numbers paired with lower inflation create an environment conducive to rate cuts, as the Federal Reserve might ease monetary policy to sustain growth without overheating. Yet, the persistent high probability of no rate cuts suggests underlying market skepticism. One possible explanation lies in global geopolitical tensions, such as the escalating Russo-Ukrainian conflict, which could be driving uncertainty in energy and commodity markets, prompting traders to hedge against potential inflationary shocks that might force the Fed to hold rates steady. Additionally, the Fed may be prioritizing long-term stability over short-term signals, especially if wage growth or other inflationary pressures remain a concern despite the headline inflation drop.

This long-tail market on May job growth serves as a potential early signal for traders and forecasters, foreshadowing shifts in broader economic indicators. If the U.S. economy indeed adds 100K–149K jobs, it could bolster confidence in a soft landing, possibly nudging the Fed rate cut odds higher in the coming months. Conversely, if geopolitical risks materialize, the Fed might remain cautious, validating the current market stance. Monitoring this interplay between long-tail and liquid markets offers a strategic edge, illuminating how micro-signals can ripple into macro-outcomes.

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